Southwest Ends an Era While American Begins a New One

It was a sentimental day over in Dallas yesterday when Herb Kelleher officially stepped down as Chairman of the Board of Southwest Airlines. It won’t, however, be the end of his involvement with the airline. He’s still going to be around for at least 5 years. Apparently he’ll be focusing on getting a more fuel efficient replacement for the airline’s 737s. Rumor has it that the new plane will be powered by Wild Turkey.

With the end of Herb’s tenure in Southwest management comes the end of an era of true airline people. I know, it’s funny to say that since Herb is a lawyer by trade, but he knew how to run an airline. And drink. And smoke. A lot. He’s not the corporate-type, and he’s not afraid to be very blunt. There’s really nobody made of that kind of metal anymore. Crandall is gone, so is Bethune, and so are countless others who built this industry on their own backs. It really is the end of a era.

So it was fitting that at the same time this happened, American stepped into a new era for the airline industry. The plentiful and cheap seats that we’ve known for a long time are history . . . at least until (if?) fuel costs begin to subside. American was just the first one to take the plunge.

American not only announced that it would slash domestic capacity in the fourth quarter by 11 to 12%, but it also said it would retire at least 75 aircraft and it would start charging $15 to check your FIRST bag. The second bag will still be $25. Why are they doing this? We’ve talked about it a million times. High fuel costs + weakening demand = doom and gloom in the airline industry. But more important than “why” is “what” does it mean to you as a traveler?

08_05_22 bringoutyourdead

The capacity cut will help keep fares up after the heavy summer travel season has passed. So get ready to continue to pay more. Start readjusting your sense of what a fair fare would be, because it’s going to need to be higher.

No details have been released as to which flights will be going away, and American never responded to my query, but we do know that 40 to 45 of the planes will be mainline, another 35 to 40 will be RJs, and there will be an undisclosed number of turboprops going away as well.

Of those mainline planes, most will be, as expected, the gas-thirsty MD-80s that are either now bound to fly for Allegiant or be earthbound for Miller Brewing Co. Those flight cuts could come from anywhere in the US, but I have to think that St Louis is going to see further shrinkage. Meanwhile, they’re also retiring some of the A300s. These are exclusively flown to the Caribbean, so you’ll see smaller planes, if not fewer flights, down there. There will also be RJs and turboprops going away. I’m not sure where the cuts will be, but it wouldn’t surprise me to see the California turboprop flying disappear as well as some of the west coast regional flying. This is, of course, all speculation.

And then there are the baggage fees. Oh boy, what a can of worms this opens. It’s funny that AA was the lone holdout on the fee for checking a second bag for a long time, but now they’re the first to jump right in and charge for the very first bag. This is going to be an ugly transition period.

Now, people will do anything they can to avoid checking a bag. But wait, you still can’t bring liquids over 3 oz through security, so what can you do? Well, you can try to sneak liquids in, and I’m sure many people will. You can just suck it up and pay the fee for checking bags as well, and some will have to do that. I think it’s a safe bet that most people will try to cram as much as they can into a carry-on, and that leads to filled overhead bins and possibly some pretty ugly fights at the gate. What if the overheads are full? Will they charge you to gate-check your bag? There are so many painful operational scenarios here that would keep any customer service agent up at night.

But ultimately, it was American’s realization that as fuel costs continue their upward trajectory, they really don’t have a choice. This is truly the least imaginative way to raise money, but it’s the EASIEST way. Raising fares isn’t even as easy as this. And right now, they’re going for quick and easy. So, once again, brace yourselves when you have to travel. This is going to contribute to an even more difficult experience at the airport. Practice meditating and lay off the coffee when you’re heading out on a flight. The industry is going to be fundamentally changing, and it’s not going to be pleasant while it happens. Hopefully, when things settle down, airlines (existing or new) will find a better way to do business, but for now . . . yikes.

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31 Comments on "Southwest Ends an Era While American Begins a New One"

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Ben
Guest
Living in Dallas i really have no choice but to fly AA. I have put up with a lot of crap from this airline and this baggage charge is the LAST straw. I want the AA execs to know that from now on I will do ANYTHING to avoid flying your airline. I will go over to Love Field and fly SWA and happily make a stop to get to where I am going. And as a share holder I have a message to Mr. Arpey…You have lost my confidence in your ability to run the airline. I now have… Read more »
Jeff K
Guest

Why would the turbo props go if they are still some of the most fuel efficient planes out there ?

And ff the ticket prices are going up and the service going down even more, should they re-regulate the industry? Sure, during the regulation years tickets were very expensive but if my memory serves (I was a kid then) the service was miles beyond what we have now.

So if I’m going to pay anyway why not at least get a better experience?

I know this all won’t happen – just fun to speculate.

Jeff K
Guest

btw, Brilliant Monty tie-in…very funny.

Zach
Guest
Why are U.S. airlines so averse to European-style revenue generation–things such as logo planes, selling ad space on overhead bins, charging for priority boarding (obviously, Southwest has implemented a version of this system), cutting back on creature comforts. The Euro airlines also charge for bags, granted, but their fares are also low enough to justify it. Is it that U.S. consumers are too fickle or picky, or does it have something to do with the regulation system here? It just seems odd that you can pay ~$125-200 r/t from Dublin-Athens or Stanstead-Barcelona, while the same distance trips within North America… Read more »
Zach
Guest

Thanks for the informative reply. Sounds like it’s a matter of segment length coupled with the fairly high expectations of the American consumer.

AN
Guest

What was the earthbounc for Miller Brewing comment about?

L1011
Guest

AN – Parking airplanes, scrapping ’em then making beer cans out of them. At least I think that’s what means. I don’t want to put words in CF’s mouth. Please correct if I am wrong.

spengle
Member
Not sure what CF means by demand for a ‘full service product’. What was the last time anyone got any semblance of that unless flying First or Business class? First the food disappeared, then the peanuts and pretzels, and, soon there will be a charge for any type of beverage (I think). Tuesday evening, my full service airline (the one now charging for one bag) cancelled my flight due to weather – admittedly not their problem. I was at the gate. In order to be ticketed on a later flight, I had to go back to the ticket counter (first… Read more »
Artie
Guest
Wow man – I was ready to puke when I read that AA was going to do the first bag charge. I always had an inkling it would come to this, just not so soon. As to Zach’s query, I think one reason why the European low-cost model has only seen modest success here in the States is that consumers like myself PREFER one-price bundles that encompass everything I will need. (By the way, I don’t consider Southwest as similar to a European definition of low-cost airline). Think the Cable/Internet/Phone bundles or the Wireless packages with text, etc. When I… Read more »
Shannon
Guest

On your comment, “It’s funny that AA was the lone holdout on the fee for checking a second bag for a long time, but now they’re the first to jump right in and charge for the very first bag…”

Southwest still doesn’t charge you to check a second bag, and it’s just $25 for a THIRD bag–that’s where I’m putting my money. It will be interesting to watch the customer reaction on this one.

A
Guest
Going back to regulation or not, the only way I see the airlines surviving with current fuel prices is going back to high fares, regulated or not. Growing up I was one of the only kids in grade school that had ever flown on commercial aircraft. Most of my classmates parents hadn’t ever flown. Even after de-regulation in the 1980’s most of my friends weren’t jet setting anywhere. It was leisure travel for the wealthy and for business. People didn’t spring break in Mexico, a trip to Europe was once in a lifetime, family vacations were by station wagon. I… Read more »
David
Guest
In Europe it should be remembered that the service from Ryanair is quite different to the service from one of the big network carrier like BA / Lufthansa. The prices are quite different as well ! For a 2-hour flight i.e. 800 miles each way, on Ryanair at an off-peak time in Europe, you’re very lucky to get a return fare below about $125. For a 4-hour flight – i.e. 1600 miles each way, reckon on $200-$250 as a minimum for a return, unless you’re extremely flexible on when you want to fly. That means booking months in advance, web… Read more »
Zach
Guest
David, I’m with you in that I would much rather pay for no frills and truly receive no frills. Plastic seats are fine if that’s what I pay for. Then again, we’re probably the exception to the rule. In today’s climate, $250 for a $1,600-mile roundtrip (roughly Chicago-Vegas) is still highly reasonable. That being said, I understand that Ryanair and Easyjet offer far less than even the stingiest North American carriers while increasing inconvenience to the traveler in terms of the far-afield airports and expensive bag check fees. For whatever reason, I usually end up in Europe about once a… Read more »
Yo
Guest

I had one experience with RyanAir, from Dublin to Pisa.

Late, cramped, crowded and horrid.

“Have you ever been in a turkish prison?”

Not fun.

David M
Guest

Artie wrote: “That being said, I really REALLY wish Airlines would do things like sell advertising space on, in, under, around, ANYWHERE on the plane in order to raise more revenue.”

Yet people criticized America West and US Airways for putting ads on the tray tables. I’ve flown a few times and it doesn’t bother me. As the ad is on the surface of the table, you don’t see it unless the tray table is down, and if the tray table is down you probably have something on top of it anyway.

james
Guest
If a plane gets decked out in ads like an auto in a Nascar loop how much will it REALLY bring down fares? I don’t care about exterior ads, but give/keep the interior a minimum level of aviation continuity. It already annoys me when I can’t turn the brightness down on seatback TV ads, (Frontier DTW-DEN Tuesday morning,) so I prefer the drab filthy butter colored interiors of planes to garish ads. If all airlines started plastering ads on seat backs, tray tables, overhead doors, floors (like in the supermarket,) lavatories, FA uniforms, cockpit doors, and safety cards (“In case… Read more »
Artie
Guest

James – would you rather glance at some ads on your tray table, or would you rather read billboards for mile upon mile when you have to drive because you were priced out of flying?

Southwest Airlines had one mission – to provide the freedom of flight to ALL Americans. I find this mission to be admirable and one that we should continue to pursue. Pricing people out of flying with endless fees is an unacceptable long-term solution.

daren_siddall
Member
I seriously doubt that charging $15 to check a bag is going to have much of a positive financial impact for AA in this climate. Most of the US carriers have spent years focusing on bean counting rather than delivering customers what they want, a good service experience. Each time they start charging for something, they fail to take the opportunity to improve the experience. Take food as an example. Rather than taking a look at food and get creative with ways to get people to spend more on the plane, they just stock up the galley with junk which… Read more »
Remove the Barriers?
Guest
With all respect to Daren S. I don’t know if removing barriers to entry is a great solution. There are already hardly any barriers to entry, hence the reason there are always startup airlines willing to undercut the legacies and provide less service while driving fares down to the point of unsustainability. Spirit, ATA, USA3000, Go!, just to name a few. We don’t need more of that. It will just result in the likes of Ryanair setting up shop here and service getting even worse and our remaining few real airlines going belly up. (Or “tits-up” as they like to… Read more »
daren_siddall
Member

I agree totally that we don’t need cheaper fares but I don’t see start-ups as providing true competition in these market conditions, they just can’t get scale. By removing foreign ownership rules, this will allow consolidation and by generating scale allow greater efficiency and ultimately profitability. The Open Skies deal struck by the EU and US is under threat if this doesn’t happen, so it will be interesting to see what transpires in the next couple of years.

Remove the Barriers?
Guest
That’s exactly the problem, these startups can’t succeed in anything we need the legacies for (real network to small and international destinations), but, at the same time they drastically drive down fares on the routes they compete on. Well, when you squeeze the balloon on that side, causing the legacies to lose money on those routes (e.g. Las Vegas, Orlando), the only place the balloon can stretch and the airlines can make their money, is international routes and routes to small airports, which don’t have the competition. So congratulations, you have more flights and overcapacity on your flight from podunk… Read more »
flylbb
Guest

Raise fares???

The Avg two hour flight needs about $50-60 per pax to cover gas these days. The Avg Transcon needs about $110 per pax.

So, to cover all other costs, pay for the pilot contracts, and make a little bit to appease investors and to internally reinvest in the product, the two hr flight needs to price out over $200. The Transcon over $350.

So let’s see….CHI-HOU’s cheapest price is $119 and LAX-BWI is at $99.

this is a problem….this is not modestly raising fares.

A
Guest
flylbb – I would have no problem paying $400-500 for a 2 hour roundtrip flight. Problem I see is that ticket prices do not reflect the cost of flying across the board. I often fly MSP-DFW for next to nothing, a heavily traveled route with plenty of competition. Then I fly MSP-YYC and pay 4 to 5 times as much for a similar distance but with much less traffic and zero competition. Odds are NW is making money on that YYC route and losing on the DFW. I’m perfectly fine with the price I pay going to Calgary, but think… Read more »
Marks
Guest
I guess there is the other option – carry less baggage. I suppose winter flights and business flights mean people have a bulk of clothing to carry. However, I never cease to be amazed by the size of luggage that some people carry. Summer holiday travel should easily be able to be limited to cabin baggage. I know that it is a matter of opinion what people should take – but when people take half their stuff ‘just in case’ they need it, and they are going to places where they could buy the stuff ‘if they ever need it’… Read more »
Marks
Guest

Blast – I forgot to mention.

Jetstar Airways in Australia is sort of doing the same thing as AA.

However, it is being a little more PR conscious.

Its ‘normal’ fares are going up, but it has introduced a Jetstar ‘light’ fare for cabin baggage only at a lower rate by about $20. ie you pay extra if you have a checked in bag – but they make it look like a discount for a cabin bag only. LOL.

Nick Barnard
Member
Jetstar’s way around it is a great idea. Its unbundling but in a way that is positive for the customer not negative. Now the problem in the US comes down to would the GDSs as they’re constituted now support this? I’m no expert on them but I’d say no, at least not clearly. You’d have to have some fare class that doesn’t include it. However almost nobody reads the fine print on their fare class, and getting all of the various sellers to support it would be tough. Now if the airlines could selectively release those fares to sellers that… Read more »
Michael
Guest
Not that I fly AA very often, if ever, but I know that they won’t be the only carrier to adopt the $15 first bag fee. I completely understand they’re under the gun with the sharp increase in fuel costs, but ignorance is bliss. Don’t nickel and dime me, just add it to the cost of the fare. I think the scenarios the CF listed in the initial post are all likely possibilities due to this new fee. If it was just included in the fare we wouldn’t have to worry about running out of overhead space, fights around gate-checked… Read more »
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